The dollar hovered near its five-week lows on Tuesday following remarks from Federal Reserve Chair Jerome Powell that reinforced expectations of a rate cut in September. Concurrently, cryptocurrencies saw gains amid growing speculation of former President Donald Trump’s potential reelection.
Powell’s comments on Monday, addressing the second-quarter U.S. inflation data, provided optimism that inflation rates are approaching the Fed’s target in a sustainable manner. He highlighted the recent favorable inflation readings as supportive of this outlook during an Economic Club of Washington event.
These statements, likely Powell’s final remarks before the Fed’s upcoming meeting, significantly altered market expectations regarding future rate cuts. According to the CME FedWatch tool, markets are now pricing in a full 68 basis points of easing for this year, with a September rate cut already fully anticipated.
In response, the euro edged lower to $1.0893, while sterling was last seen at $1.2967. The dollar index, which measures the greenback against six major currencies, held steady at 104.3, not far from its recent one-month low of 104.
Charu Chanana, head of currency strategy at Saxo, commented, “Despite Powell’s dovish stance, he remains data-dependent, a prudent approach after the Fed’s experience with higher inflation earlier this year following a dovish shift in late 2023.”
Looking ahead, today’s U.S. retail sales data for June is expected to reveal a 0.3% month-on-month decline, influencing market sentiment alongside upcoming growth and labor figures.
In the cryptocurrency sphere, bitcoin rose by 1% to approach $65,000, near its highest level in a month, while Ether climbed 1% to $3,466, marking a two-week peak. These gains came amid increased investor optimism following an attempted assassination on Trump, boosting expectations of his electoral success.
Trump, who has positioned himself as a proponent of cryptocurrencies without specifying policy details, garnered support among crypto enthusiasts during a recent San Francisco fundraiser.
Chris Weston, head of research at Pepperstone, noted, “While regulatory considerations under SEC Chair Gary Gensler remain a focal point for the crypto community, having the potential backing of the U.S. president resonates positively with enthusiasts.”
Elsewhere in the currency markets, the Australian dollar edged 0.16% lower to $0.6749, retreating from last week’s six-month peak, while the New Zealand dollar eased 0.17% to $0.6064, touching a two-week low.
